The allowance for doubtful accounts is adjusted when there is a change in the amount expected to be collected from credit customers.
What is the allowance for doubtful accounts?
The allowance for doubtful accounts as a contra account of the accounts receivables usually has a credit balance.
The account reduces the total receivables on the balance sheet because it reflects the amounts estimated as a collectible from credit customers.
Thus, the allowance for doubtful accounts is adjusted when the amount expected to be collected from credit customers increases or decreases.
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